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AAP

2013-01-21

Economists believe consumer prices rose modestly in the December quarter, but not slowly enough to lock in another interest rate cut for Australian homeowners.

AAP's survey of 14 economists reveals a median forecast for December's Consumer Price Index to show an average increase of 0.5 per cent in prices over the December quarter.

Underlying inflation, which excludes the most volatile price movements and is the Reserve Bank of Australia's preferred measure, is expected to be at 0.65 per cent for the quarter.

Over the 12 months to December, consumer prices are expected to have risen 2.5 per cent and underlying inflation is expected to be 2.4 per cent, around the middle of the RBA's target range of two to three per cent.

The Australian Bureau of Statistics will release official CPI figures on Wednesday.

AMP chief economist Dr Shane Oliver says the figures will show a considerable slowdown in price rises compared to the September quarter, which saw headline inflation of 1.4 per cent, which was partly attributed to introduction of the carbon tax in July.

He said the impact of the carbon tax on prices in the December quarter would have been minimal.

"It'll be adding something but it is probably less than 0.1 of a per cent, and probably less than 0.05 of a per cent," he said.

But he said inflation was unlikely to be weak enough to prompt the RBA to cut the cash rate again at its February 5 board meeting.

"If the underlying rate comes in at 2.2 (per cent) or less then I think that could well clear the way for a rate cut," he said.

"But if it comes in around 2.4 or more its probably not enough for a rate cut." The RBA cut the cash rate a quarter of a percentage point in December, bringing it to three per cent.